On February 27, the Court of Chancery in Weingarten v. Monster Worldwide, Inc. held as a matter of first impression that a stockholder cashed out in a merger lacked standing when he served a books and records demand under 8 Del. C. § 220, but did not sue, before the merger closed.
The Court sidestepped policy arguments by applying the “unambiguous language” of the statute, which requires a stockholder to “first establish” that “[s]uch stockholder is a stockholder”. The Court held that the statute thus “made clear that only those who are stockholders at the time of filing have standing to invoke this Court’s assistance under Section 220.”
The Court distinguished two other Court of Chancery cases where plaintiffs had been squeezed out after – not before – filing their Section 220 complaints.
For lawyers representing aggrieved holders of stock in a company soon to merge, the lesson of Weingarten is clear. Serve the demand and file suit before the merger closes – or risk dismissal for lack of standing.
Filed under: Court of Chancery, Section 220 Books and Records, Standing
Delaware Corporate Law Update 